Bitcoin bank Bitcoinica still titsup after cyberheist

Bitcoin exchange Bitcoinica remains offline following a hack against its systems last week that resulted in the theft of digital currency valued at approximately $90,000 (£56k).

The digital currency exchange took its servers offline on Friday following the discovery of a breach on Friday, as a statement on Bitcoinica's website explains.

It is with much regret that we write to inform our users of a recent security breach at Bitcoinica. At approximately 1:00pm GMT, our live production servers were compromised by an attacker and they used this access to deplete our online wallet of 18547 BTC.

Follow-up reports on the Bitcointrader blog suggest that surfers visiting Bitcoinica were redirected to a porn site at the time of the hack, an odd tactic as cyber-theft would seem to have been the only motive for the assault, and since the tactic then drew attention to a deeper breach that might otherwise have gone undetected for longer. The redirection has been curtailed by the bitcoin exchange, but Bitcoinica's services might not return to normal for some time, a follow-up Bitcointrader post suggests.

Bitcoinica said it was suspending its operations for an unspecified period while it runs an investigation into the breach, the second it has suffered over recent months. The exchange is keen to stress that the thief stole from the exchange itself rather than from accounts maintained by clients, stressing that all withdrawal requests would be honoured.

However Bitcoinica that its database was "likely compromised", and that customers' usernames, email addresses and account histories could be at risk. Such information might provide fodder for future phishing attacks.

Passwords and identifying documents were kept in encrypted files and ought to be safe. Even so, the exchange still advises users who have used their Bitcoinica password elsewhere on the web to change up their passwords as a precaution.

The latest assault follows a hack against Bitcoinica's hosting firm that led to the theft of $225,000 (£149,200) worth of Bitcoins only two months ago. Earlier reports suggested $70K (£43k) had been swiped following a cyberheist against web host Linode, but these figures were later revised upwards.

The Bitcoin virtual currency also hit the news last week with the leak of an (unclassified) FBI internal report on the digital currency. The leaked memo (PDF) argues that that the digital currency is likely to become a payment option for cybercrooks alongside established virtual currencies in the digital underground such as Webmoney and e-Gold. Bitcoin's decentralised nature poses increased challenges for investigators compared to other virtual currencies, it warns, adding that crooks are highly likely to target third-party Bitcoin services to raid individual Bitcoin wallets.

The coincidence in the timing of the Bitcoinica hack and the leak of the FBI memo of Bitcoin sparked a number of conspiracy theories speculating that the two events might somehow be linked.

Rob Rachwald, director of security strategy at Imperva, commented: "The Bitcoin attack introduces an interesting paradigm: hackers hacking hackers may be more effective than direct law enforcement activity. Like a mafia war where criminals kill each other, law enforcement just sits back and sees who’s left."

More commentary on the attack can be found in a post on Sophos's Naked Security blog here.

Bitcoinica members are discussing the attack on the bitcointalk.org Bitcoin forum here and here. ®